One of the aspects of President Obama’s worldview that has drawn consistent fire is his evident hostility toward business. His comments in Roanoke, Virginia three weeks ago (“If you have a business, you didn’t build that”) are just the most recent in a long history of shameful displays of ignorance about the way a business is launched, how it is grown, and what makes it successful.
In his speeches, Obama tends to praise businesses only as a lead-in to calling for higher taxes on them. The President likes to attach a taint to the word “business,” as if every enterprise were Enron and every founder was Scrooge McDuck, hording piles of gold in his basement. This convenient dodge feeds a vague but satisfying resentment in some of Obama’s core constituencies toward big, faceless, evil “multinational corporations,” which are easy to hate.
But the reality about business in America is quite different, and those who understand this most keenly are those who have started businesses – and the family members who have supported them. They know firsthand that Obama’s attacks on business in general translate to a war on family business in particular.
Few people realize just how predominant family business is in the United States. So some statistics (available from the Census and the U.S. Small Business Administration) are instructive.
First, most businesses in the U.S. are not large. Over 78% of all businesses (21M out of 27M) in the United States are “non-employer” firms, meaning that they report no payroll. In other words, they are either partnerships or sole proprietorships. In fact, the vast majority (it varies from year to year, but typically around 70%) of all businesses are run as sole proprietorships.
Of the remaining 6+ million “employer firms,” nearly 90% employ fewer than 20 people. 1.3 million of these companies gross less than $100,000 each year. 3.7 million have gross receipts of less than $500,000 a year. 4.6 million – or 76% - of all “employer firms” in the United States gross under a million dollars each year.
In other words, most business in the United States is small business.
It is important to consider these data when Obama calls for higher taxes on people making more than $250,000, lumping them with “millionaires and billionaires.” Since most small businesses operate as sole proprietorships, this means that the business doesn’t pay the taxes (as a corporation would); the individual owner pays all of the taxes on the business’ income. And while some might think that $250,000 would be a cushy salary for one person, a business generating $250,000 in gross receipts is a VERY small enterprise indeed. From this amount must come state and federal income taxes, property taxes, rent or mortgage payments, insurance, salaries, benefits, unemployment and workers compensation payments, and more.
Furthermore, 80 – 90% of all businesses in the U.S. are family-owned – including 35% of all Fortune 500 companies. Family-owned businesses are responsible for 50% of all GDP in the U.S., 60% of all U.S. employment, and 65% of all wages paid in the U.S.
Family-run businesses also have a more personal investment in their employees and in their communities. According to Anne Kincaid of Family Enterprise USA, family businesses have far less leadership turnover than shareholder-owned companies, and are less likely to let employees go, even in tough times.
One would think, therefore – particularly in a struggling economy – that the President of the United States would want to encourage the creation of businesses, laud those who take the personal financial risks to start them, and use power of the presidency to minimize the burdens government can impose.
To the contrary, the policies advocated by this president are crippling to business. Just a few examples:
1. Taxes. As noted above, taxing businesses grossing between $250,000 and $1 million a year hits a disproportionate number of the sole proprietorships and small family businesses we desperately need to expand and hire more people. It also discourages prospective entrepreneurs. Then there is his “Buffet rule” tax proposal and his insistence upon raising the capital gains rate. The former is just silly posturing. The latter will negatively affect investment – which, of course, will mean that small businesses have a harder time becoming larger ones.
2. Obamacare. The Patient Protection and Affordable Care Act will be ungodly expensive, and many small businesses – read family businesses – are not going to be able to afford to insure their current employees, much less hire new ones. Family Enterprise USA reports that 61% of the family firms they surveyed believe that the new law will make it harder, not easier, to pay for employee health care.
3. The HHS mandate. Having to provide what Obamacare considers to be appropriate insurance coverage is already burdensome. But the Obama administration has made this worse by insisting that all employers pay for sterilization and contraception – including abortifacient contraception. Catholic and other Christian universities and hospitals have filed lawsuits to contest the enforcement of this mandate, arguing that it compels them to violate the core teachings of their religious beliefs. But many family businesses are run by individuals who share those same beliefs, and they, too, are threatened by the HHS mandate. Already, at least one family business has sued – successfully. Others have followed. These are laudable developments. But most family businesses cannot afford the expense of a lawsuit in federal court.
4. The constant calls for reduction of the charitable deduction. President Obama has now tried five separate times to reduce the amount of the charitable deduction. This is inscrutable. The average family firm donates $50,000 to charities and philanthropic causes – most, locally for maximum impact. Larger companies donate much, much more.
(Sidenote: since Obama is so keen to yank America toward European-style socialism, he might want to read The Economist’s story from last week, blaming European government policies for the dismal lack of entrepreneurship and economic growth there.)
In light of these events, it is not surprising that the Roanoke speech has become the negative tagline for the Obama presidency. Every family with an entrepreneur in it knows that the business founder didn’t do it on his or her own; spouses and children also make substantial sacrifices to help launch a business, grow it, make it successful and keep it that way. Families in business also know how difficult government makes it.
The Roanoke speech is also the gift that keeps on giving to Mitt Romney. The president’s antipathy to business is affecting his reelection campaign. Donors had already been fleeing Obama in droves – including Democrats who are now supporting Romney. The result is nearly unthinkable to Democrat strategists: Romney is actually outpacing Obama in fundraising, and by a substantial margin.
No wonder. While it might be understandable that those who don’t own a business might vote for Obama the second time around, it is inexplicable that anyone who does – or wants to -- would. And that is a lot of people.
Laura Hollis is an Associate Professional Specialist and Concurrent Associate Professor of Law at the University of Notre Dame, where she teaches entrepreneurship and business law. She is the author of the forthcoming publication, “Start Up, Screw Up, Scale Up: What Government Can Learn From the Best Entrepreneurs,” © 2014. Her opinions are her own, and do not reflect the position of the university. Follow her on Twitter: @LauraHollis61.